Vietnamese market set to boom

April 7, 2007

The Vietnamese property market is one of the fastest-growing in it’s region, largely due to greater foreign investment and household incomes. Although investment in the region is growing at such a rapid rate, there are of course downfalls to consider when investing.

Marc Townsend, the director of CB Richard Ellis (Vietnam), attributes the real estate boom to Vietnam´s entry into the World Trade Organisation (WTO) and the rapid growth in the stock market.

WTO membership has encouraged more foreign companies to invest in Vietnam, pushing demand higher for mid- to high-grade office space and hotels, with an increasing number of business travellers.

CB Richard Ellis predicts the demand for retail space at shopping centres will continue to rise, with more companies competing in a more liberalised economic environment in the WTO era.

As a result, domestic and foreign property developers are planning to inject millions of US dollars into the market to build five-star hotels, entertainment and shopping complexes, and office buildings in all the major urban centres.

However, these new construction projects are at a premature stage and are years from being completed, causing a short term shortage in available space.

According to HCM City Real Estate Association (HCREA), many high-end office buildings in Hanoi and HCM City are fully occupied and cost about US$35-38 a sqm per month. A booming stock market has also contributed to real estate growth. Along with this, fund managers are also flooding the market.

Townsend noted that the money earned from securities trading is being redirected to the more stable real estate market. This has led to greater domestic demand for high-rise apartments and villas.

VinaCapital controls 70 per cent of Hilton Hanoi after acquiring an additional 50 per cent stake earlier this year. The company also owns 70 per cent of Sofitel Metropole Hanoi, and operates two property funds that expect returns of 25-30 per cent.

Tran Thanh Tan, director of Dragon Capital’s securities investment fund, predicts that the future is bright for property in Vietnam, with the market expected to continue its steady growth in 2007 and the following year.